As a consequence of amalgamation of regions at varying levels of socio- economic development & different political and administrative structures, the modern state has inherited regional imbalances that still persist. The backwardness of states is measured to understand the extent of these regional imbalances. Some of the attempts to define or measure backwardness in India are mentioned below. However, it is pertinent to note that no state has been categorized as a "backward state" in India:
Measuring backwardness of taluks in the state of Karnataka - 2000
Considering the resentment in North Karnataka over growing disparities, the state government of Karnataka had appointed a High Powered Committee for Redressal of Regional Imbalances (HPCRRI) in October 2000. Committee studied the disparities & presented its report in June 2002 wherein all the taluks in the State were categorized in the order of backwardness. The study followed a two-fold approach
- overall level of backwardness of taluk was determined by evolving Comprehensive Composite Development Index (CCDI) using 35 indicators
- taluks were classified as Most Backward, More Backward and Backward Taluks
The 35 indicators considered by this study pertained to 5 main sectors:
- Agriculture - % of Total cropped area to net area sown, % Area under food grains, % of Area under Horticultural crops to total Cropped Area, % Area under Commercial crops to total Cropped Area, % net area irrigated to net area sown, Fertilizer(NPK) Consumption in Kg per Hec, No. of Tractors per 000 hectares, Live Stock Units per lakh rural population, Bank Credit to Agriculture
- Industry, Trade & Finance - No. of Industrial units per lakh population, % Industrial Workers to Total Main Workers, Bank Advances per lakh population, No. of Bank Branches per lakh population, No. of Enterprises engaged in trade, hotels & transport
- Economic Infrastructure - No. of Post Offices per lakh population, No. of Telephones per lakh population, Road length, No. of Villages having access to all weather Roads, Railway line length, No. of Motor Vehicles per lakh population, No. of Co-operative credit Societies per lakh population, Proportion of electrified villages including Hamlets, Regulated Markets & Sub Markets per lakh population
- Social Infrastructure - No. of Doctors per 10000 population, No. of Beds per 10000 population, Literacy Rate, Pupil-Teacher Rate (I to X std), Children Out of School in the 6-14 age group, No. of Students enrolled in Aided & Degree Colleges, No. of Habitations having drinking water facility of 40 or more LPCD.
- Population Characteristics - Sex Ratio, Urban Population to total Population, SC & ST Population, No. of Non Agricultural Workers, Agricultural labourers to Total Main Workers
The Committee had also calculated the resource allocation among the four divisions of the state i.e., Gulbarga, Belgaum, Bangalore and Mysore Division, based on the Cumulative Deprivation Index (1-CCDI).
Measuring backwardness of Districts at the national level - 2003-04
Concept of Backwardness also came up in the context of a scheme for backward districts, called Backward Districts Initiative – Rashtriya Sam Vikas Yojana (RSVY) – (A Tenth Plan Initiative). The Rashtriya Sam Vikas Yojana (RSVY) was being implemented in 147 districts since 2003-04. The list of districts covered under the RSVY may be seen here. The Scheme was aimed at focused development programmes for backward areas which would help reduce imbalances and speed up development. The identification of backward districts within a State was made on the basis of an index of backwardness comprising three parameters with equal weights to each:
- value of output per agricultural worker;
- agriculture wage rate; and
- percentage of SC/ST population of the districts.
This Scheme later (2006-07) got subsumed in the Backward Regions Grant Fund program, the guidelines of which may be seen here. BRGF consists of two components - (a) Districts Component covering 270 districts, and (b) State Component-which covers special plan for West Bengal, Bihar and the KalahandiBolangir-Koraput (KBK) Region of Odisha and Bundelkhand packages for UP & MP. The implementing Ministry for the BRGF districts component is the Ministry of Panchayati Raj. This Scheme was also proposed for closure from December 2009 as most of the districts have claimed their total allocation of Rs.45 crore each. As such there is no proposal under consideration of the Government to extend RSVY to other districts of the country. However, a special development package of Rs. 850.00 crore has been provided to the state of Andhra Pradesh from BRGF (State component) during 2014-15.Pursuant to the recommendations of 14th Finance Commission for higher untied tax devolution to states, the scheme followed a natural death since 2015-16. Hence, the ongoing projects under BRGF for addressing Intra-State inequality may be supported by the States out of their own funds, including received under the recommendations of 14th Finance Commission.
However, the Parliamentary Standing Committee on Finance in its report in April 2015 (on the Demand for Grants of Ministry of Finance) had disagreed with this view in their report and were of the view that such subsuming of specific schemes designed with a special purpose / focus to uplift living standards in backward and under-developed areas / regions with chronic poverty is not desirable. According to the Committee, Central budgetary support and an element of hand-holding by way of special central assistance is therefore still required to bring about social and economic development in such areas, which are lagging far behind in socioeconomic indices and which also face extraordinary challenges.In this regard the Committee desired that the recommendations of Raghuram Rajan's Report on backwardness of States (Committee for Evolving a Composite Development Index of States) may be considered and appropriately implemented.
Measuring backwardness of states - 2013
Government in May 2013, decided to constitute an Expert Committee under the chairmanship of Dr. Raghuram Rajan to measure backwardness of the Indian States by evolving a Composite Development Index of States for guiding devolution of funds from central government to such backward states. The committee submitted its  in September 2013.
The Committee proposed a general method for allocating funds from the Centre to the states based both on a state’s development needs as well as its development performance. Towards this, committee created a multi-dimensional index based on certain measures which correspond to the multi dimensional approach to defining poverty outlined in the Twelfth Plan. Need is based on a simple index of (under) development computed as an average of the following ten sub-components:
- monthly per capita consumption expenditure
- household amenities
- poverty rate
- female literacy
- percent of SC-ST population
- urbanization rate
- financial inclusion
Improvements to a state’s development index over time (that is, a fall in underdevelopment) is taken as the measure of performance. Less developed states rank higher on the index, and would get larger allocations based on the need criteria, with allocations increasing more than linearly to the most underdeveloped states.
The Committee recommended that States that score 0.6 and above on the Index may be classified as “Least Developed”; States that score below 0.6 and above 0.4 may be classified as “Less Developed”; and States that score below 0.4 may be classified as “Relatively Developed”. The “Least Developed” states effectively subsume what is now “special category” state.
Committee recommended that each State may get a fixed basic allocation of 0.3 percent of overall funds, to which will be added its share stemming from need and performance to get its overall share. Of the funds remaining after the allocation of 0.3%, around 3/4th will be allocated based on need and 1/4th based on performance.
Using the index, the Committee has identified the “Least Developed” states as Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Meghalaya, Odisha, Rajasthan and Uttar Pradesh. Government as on date has not taken any decision on the recommendations of the Committee.
Report on General Issues Relating to Backward Areas Development, National Committee on the Development of Backward Areas (1981)
Methodology to identify Backward taluks in Karnataka (About 137 taluks)
Backward Regions Grant Fund, Programme Guidelines, Ministry of Panchyati Raj